The Prairie Enthusiasts, Inc. ACCOUNTING POLICIES AND PROCEDURES MANUAL

Transcription

1 The Prairie Enthusiasts, Inc. ACCOUNTING POLICIES AND PROCEDURES MANUAL RECOMMENDED BY FINANCE COMMITTEE TO TPE BOARD OF DIRECTORS November 9, 2016 Approved by: Finance Committee Nick Faessler, Chair Date: Board Scott Fulton, President Date:

2 TABLE OF CONTENTS 1.00 BACKGROUND INFORMATION... 5 Also, please see TPE Policies and Procedures Handbook, Part I, and the TPE Chapter and Central Treasurers Handbook CHART OF ACCOUNTS Accounts 2.20 Classes 2.30 Jobs 3.00 ACCOUNTING PRINCIPLES AND PROCEDURES Policies 3.20 Procedures 3.21 Revenue Recognition 3.22 Matching of Revenues and Expenses 3.23 Fixed Assets and Depreciation 3.24 Donated Materials and Services 3.25 Data Cutoff 3.26 Deviations from GAAP 4.00 CASH DISBURSEMENTS 4.10 Policies Procedures 4.21 General Cash Disbursements Also please see the TPE Chapter and Central Treasurers Handbook 4.22 Payroll 5.00 CASH RECEIPTS Policies 5.20 Procedures Also please see the TPE Chapter and Central Treasurers Handbook 6.00 BANK RECONCILIATION Policies 6.20 Procedures 6.21 Checking and Money Market Accounts 6.22 Investment Accounts 7.00 END OF MONTH ACCOUNTING PROCEDURES Policies 7.20 Procedures Page 2 of 36

3 TABLE OF CONTENTS (continued) 8.00 END OF YEAR ACCOUNTING PROCEDURES Policies 8.20 Procedures 8.21 General 8.22 Audited Financial Reports 8.23 Informational Returns 9.00 ALLOCATIONS Policies 9.20 Procedures 9.21 Investment Income 9.22 Membership Dues 9.23 Grants Overhead Rates Also please see the TPE Chapter and Central Treasurers Handbook Administrative Fee 9.25 Insurance Expense INCOMING GRANTS Please see the TPE Chapter and Central Treasurers Handbook INVESTMENTS Policies Procedures Also please see TPE Investment Policy DEBT Policies Procedures DONOR RESTRICTED NET ASSETS SHORT TERM Policies Procedures DONOR RESTRICTED NET ASSETS - ENDOWMENT Policies Procedures BOARD-DESIGNATED ENDOWMENTS Policies Procedures LAND ACQUISITIONS AND EASEMENTS Policies Procedures Also please see TPE Policies and Procedures Handbook, Standard 2, Parts A-C. Page 3 of 36

4 TABLE OF CONTENTS (continued) PROPERTY AND EQUIPMENT INVENTORY Policies Procedures Also please see the TPE Chapter and Central Treasurers Handbook INTERNAL CONTROLS AND FINANCIAL AUDIT Policies Procedures Also please see the TPE Chapter and Central Treasurers Handbook BUDGETING Policies Procedures COMPLIANCE Please see TPE Policies and Procedures Handbook, Standard 2, Parts A-C ACCESS TO RECORDS, RECORDS RETENTION AND RECORDS BACKUP Please see TPE Policies and Procedures Handbook, Standard 2, Part D MAINTAINING THIS MANUAL Policies Procedures SUMMARY OF ACTIVE ENDOWMENTS.. 32 APPENDIX A ENDOWMENT FUND POLICIES.. 33 Easement Monitoring Endowment Legal Defense Fund Olive & John Thomson Internship Fund Operations Endowment Page 4 of 36

5 1.00 BACKGROUND INFORMATION TPE will employ a Bookkeeper to execute day-to-day financial transactions of the organization, maintain bank accounts, track project activity, and communicate with and report to the chapters. TPE will also contract with an Accountant to oversee this activity, make certain accounting entries, produce board reports, and assist with other activities as requested. In addition to this manual, TPE maintains a Chapter and Central Treasurers Handbook. This document aims to standardize accounting related procedures across chapters, and clarify roles and responsibilities of the chapters and the central office. The Central office maintains bank accounts and accounting records in QuickBooks for all chapters. Due to its location outside Wisconsin, the NIPE chapter maintains its own bank accounts and accounting records, and forwards a monthly general ledger to Central for review and inclusion in QuickBooks. For more organizational and background information, please see TPE Policies and Procedures Handbook, Part I, and the TPE Chapter and Central Treasurers Handbook, Parts 1 and 2. Page 5 of 36

6 2.00 CHART OF ACCOUNTS 2.10 Accounts Assets. 1xxxx Cash Accounts... Receivables... Prepaid Accounts... Endowments... Land & Land Improvements... Fixed Assets... Other Assets... Revenues.. 4xxxx Contributions... Grants & Contracts... Sales, Rents, Other Inc... Other Income... Released from Restriction... Liabilities... 2xxxx Accounts Payable... Accrued Payroll & Payroll Taxes Payable... Unearned Income... Deferred Revenue... Notes Payable... Expenses... 5xxxx-8xxxx Personnel Expenses... Contracted Services... Fees & Services... Meetings & Programs... Operating Expense... Land Management... Net Assets (Fund Balance)... 3xxxx Unrestricted Net Assets... Restricted NA Temp... Restricted NA Perm... Restricted Sources & Uses... 9xxxx Sources of Income... Permanent... Temporary... Uses of Funds... Temporary Classes QuickBooks classes are used to designate chapters for the purpose of tracking income and expense Jobs QuickBooks jobs are used to designate projects, grants, or land holdings for the purpose of tracking income and expense. Outside of QuickBooks, job codes are referred to as Fund Codes. Page 6 of 36

7 3.00 ACCOUNTING PRINCIPLES & PROCEDURES 3.10 Policies The accounting principles of TPE will be consistent with all applicable laws. These include: Generally Accepted Accounting Principles (GAAP), Statements of Financial Accounting Standards Numbers 93, 116 and 117, SOP 87-2 on Joint Costs, SOP 94-2 on the applicability of the accounting rules to nonprofits, and SOP 98-3 on accounting for federal awards. TPE follows modified GAAP during the year, with a small number of journal entries required at year-end (if material) to bring QuickBooks in full compliance with GAAP Procedures 3.21 Revenue Recognition Contributions are recorded as revenue in the period received or the period in which a pledge is received. Any pledges receivable are closely reviewed each month to determine whether the amount is still collectible and whether the balance of the pledges receivable is adequately reserved with the allowance for doubtful pledges. Rents are recognized in the period for which the rent is paid. Any rents receivable are reviewed monthly to determine if the amounts are collectible and to review what collection actions are being taken. Grants which are classified as exchange transactions with the grantor are recognized as revenue when the grant money is earned. This is generally determined by the costs reportable to the grantor. Each grant is set up as a separate fund code (job) to allow for accurate and consistent recording of the expenses of each grant Matching of Revenues and Expenses In order to present accurate and consistent financial statements, the revenues and expenses attributable to each period will be reflected in that period to the degree possible. Generally, all entries required to accurately reflect the revenues and expenses of each period will be made in that period. The organization records transactions on the accrual basis of accounting, with some exceptions (see below) Fixed Assets and Depreciation All equipment and other fixed assets costing in excess of $5,000 will be recorded as an asset. Expenditures which extend the useful life of an asset fall within capitalization policy. All capital assets are depreciated over their estimated useful lives. The straight line basis is used, with depreciation charged beginning in the month that the asset Page 7 of 36

8 is placed in service. Useful life may be adjusted for used assets. Some sample estimated lives for new assets are: Computers and related equipment Tractors and farm implements Office furniture & fixtures New cars and light trucks Parking lot and landscaping Building & building improvements -- 3 years -- 3 years -- 5 years -- 5 years years years All capital assets purchased with grant or other restricted funds are cataloged. See Section 16 for property and equipment inventory and management Donated Materials and Services Chapters report all in-kind donated materials to Central office to be recorded in the accounting records. In compliance with SFAS 116, certain services are recorded as in-kind revenues and expenses. Such services would be professional services that would otherwise have been purchased, provided by a person whose work would normally include providing those services. Any donated assets which would meet the definition to be capitalized, outlined above in Section 3.23, are recorded as revenue and as a fixed asset Data Cutoff In order to meet the deadlines for producing reports discussed in Sections 7 and 8, the gathering of information to use in making the month end entries must be terminated by a fixed date. The monthly financial statements are due to the Finance Committee within two weeks after the month end to review for the board. For these reports a data cutoff of one week is used. Any payables or other information not available by one week after a month end are classified in the next period. The Accountant may need to use estimates if final information is not available for a material transaction. The year end financial statements are due to the Board six weeks after year end. For these reports a data cutoff of four weeks is used. Since the year end is the most important period cutoff, the general ledger will continue to be held open for additional material transactions through the conclusion of the audit fieldwork Deviations from GAAP Deviations from GAAP are as follows: Insurance payments for vehicles are charged directly to the chapter on the date billed and not amortized over the premium period. Page 8 of 36

9 Accounts payable is bypassed when paying vendors. Expenses are dated with the check date instead of service date. (The only exceptions are the accrual for payroll taxes, which is generated by QuickBooks, and credit card bills.) Expenses charged to credit card are dated with the statement date instead of service date. Page 9 of 36

10 4.00 CASH DISBURSEMENTS 4.10 Policies Purchases may be initiated by any Central staff member, Chapter Treasurer or Chapter Chair. The Bookkeeper will maintain the accounts payable system. The Executive Director will be empowered to spend any amount for goods and services approved in the budget. Unbudgeted spending greater than $5,000 must be approved in advance by the Finance Committee. Purchases of contractor services should be limited to contractors who provide Certificate of Insurance verifying Commercial Liability and Workers Compensation insurance before a contract is entered into. Workers Compensation and other costs attributed to hiring an uninsured contractor will be charged back to the chapter responsible (see Section 9). The positions authorized to sign checks will be: Executive Director, Board President, and Board Treasurer. Only one signature will be required on checks. Anyone signing a check must review and initial the supporting invoice or other documentation. Individuals may not sign a check payable to themselves. Exception is made for the ED to sign checks to him/herself on vouchers prepared by bookkeeper. Requests to transfer funds between bank accounts will be initiated by the Bookkeeper with approval from the Executive Director. The Bookkeeper will determine payroll amounts based on timesheets and authorized rates. The Bookkeeper will prepare the payroll checks in compliance with federal, state and local laws and guidelines. The pay rates used to prepare payroll will be based on signed memos from the Executive Director. The salary for the Executive Director is based on a signed memo from the Board President. The Accountant will periodically review bank statements and reconciliations, online bank accounts, and financial statements to assure compliance with policies. In addition, auditors will review related documents during the annual audit Procedures 4.21 General Cash Disbursements Please see the TPE Chapter and Central Treasurers Handbook Payroll The Executive Director forwards approved timesheets to the Bookkeeper at the end of each month. The Bookkeeper totals up the timesheets and enters them into QuickBooks. Checks not direct-deposited are printed and presented to the Executive Director for review and signature. Payroll is processed monthly through QuickBooks and distributed by the 6th of each month. Page 10 of 36

11 5.00 CASH RECEIPTS 5.10 Policies Except for the Northern Illinois Prairie Enthusiasts chapter (NIPE), which has a local bank account, all donations will be forwarded to the Central office for recording and deposit. The person who opens mail will restrictively endorse (stamp) all checks when received. The bank deposit will be made at least weekly by the Bookkeeper, depending on volume and size of deposit, and presence of cash. Checks are deposited electronically if possible. If the Bookkeeper is unavailable to perform these duties, the Executive Director will carry them out Procedures The Communications Coordinator opens mail and creates the cash receipts log and stamps the checks. The Bookkeeper deposits checks electronically. The Bookkeeper enters donation data into the contact management database (Timberlake). Each week, the Communications Coordinator reconciles the Timberlake reports with the check log. When cash is received, the Executive Director exchanges the cash for a cashier s check for deposit. Scanned check images are saved, and physical checks are stored in daily receipts files. The Bookkeeper uses the stamped checks, accompanying documentation, and the cash receipts log to determine account coding and enter the cash receipts into QuickBooks. The Accountant reviews bank statements, reconciliations, and check images monthly (see Section 6). The auditor compares check logs and bank statements as part of the annual audit. Please see the TPE Chapter and Central Treasurers Handbook for more specific procedural information related to Chapters. Page 11 of 36

12 6.00 BANK RECONCILIATION 6.10 Policies Bank statements will be downloaded monthly by the Bookkeeper and reconciled no more than five days after receipt of the statement. The general ledger and the reconciled bank statements will be adjusted to agree monthly. The bank statements will also be downloaded by the Accountant, who will review the check images for unusual items or changes. The Accountant will also review reconciliations for completeness and unusual activity Procedures 6.21 Checking and Money Market Accounts Upon receiving the bank statements, the Bookkeeper prepares the monthly bank reconciliations in QuickBooks. A journal entry may need to be posted for items on the bank statements which are not already recorded in the general ledger. These reconciling items may include interest earned, service charges, NSF checks, direct deposits and other debit or credit memos. After the general ledger is reconciled to the bank statement, the monthly bank statement and cancelled checks and other forms and the actual reconciliation form are filed in the bank reconciliation file. The Accountant reviews bank reconciliation reports in QuickBooks Investment Accounts Trust and endowment bank statements are reconciled by the Accountant. At the end of each quarter, the Accountant downloads bank statements. Income and expenses are allocated to the various endowment Trust accounts, and journal entries are prepared and entered into QuickBooks. Printed copies of the statements are mailed to the central office for review by the Executive Director and filed. Page 12 of 36

13 7.00 END OF MONTH ACCOUNTING 7.10 Policies The Accountant will prepare the monthly financial statements, to include Statement of Financial Position, Performance to Budget, and reconciliations of Restricted Net Assets. The Accountant will reconcile all balance sheet accounts monthly. The Executive Director and Finance Committee will accept the financial statements before being sent to the Board of Directors. The Board of Directors will accept the monthly financial statements Procedures The cutoff for information in the monthly statements is seven work days after month end. Upon completion of the monthly bank reconciliations, the Bookkeeper formulates journal entries needed to complete the month. Some journal entries are determined and maintained in QuickBooks by the Accountant. These include investment activity, accruals and relief of prepaid expense. The Bookkeeper maintains files which document grant billings and project/program spending. The Accountant maintains files which document the balance of each balance sheet account. All balance sheet accounts are reconciled monthly to help ensure that accurate statements are provided to management and the Board. Once the final general journal entries are posted, the monthly financial statements are prepared by the Accountant. The financial statements are delivered to the Board of Directors within three weeks after the end of the month. The year-end financial statements may be delayed for additional procedures (see Section 8.0). Page 13 of 36

14 8.00 END OF YEAR ACCOUNTING AND AUDIT 8.10 Policies The Accountant will prepare the year-end financial statements. The Accountant and Bookkeeper will share responsibility for preparing for the annual financial audit and for working with the external accountants to complete the audit and informational returns. The Accountant and Executive Director will review the reports prior to filing them to ensure that they are accurate and do not indicate any potential problems with the tax status or fundraising license of TPE. The Executive Director and Finance Committee will accept the financial statements before being sent to the Board of Directors. The financial statements should be delivered to the Executive Director and Finance Committee at least one week prior to the mailing of the Board packet in order to facilitate this review. The Board of Directors will accept the year-end financial statements. The Bookkeeper will arrange to move records from the year which is closing to storage as indicated by the record retention policy Procedures 8.21 General The cutoff for December financial statements is extended to six weeks after year end. With this exception, procedures are identical to month-end Financial Audit The Executive Director signs the audit engagement letter to begin planning the scheduling and work needed to complete the audit, and ensures that adequate space is provided for the independent accountants to work onsite. The Accountant and Bookkeeper are responsible for preparing as many of the schedules needed by the auditors as possible. The completed monthly reconciliations for December partially fulfill this requirement. The Bookkeeper and Accountant are available at all times throughout the audit to facilitate the work of the independent accountants. The Executive Director schedules time to meet with the independent accountants as needed during the audit. The Accountant and Executive Director plan a meeting with the independent accountants at the end of the audit to discuss any issues raised, review the adjusting journal entries, evaluate the audit process and plan improvements for the following year. Page 14 of 36

15 8.23 Informational Returns As a 501(c)3, TPE is required to file the following annual informational returns: IRS Form 990, due May 15 (extension may be filed) IRS Form 990T and WI Form 4T, due May 15 (may be required), Illinois Attorney General s Office Charitable Organization Annual Report and registration renewal, due June 30 Wisconsin Department of Financial Institutions, Charitable Organization Registration Renewal, due July 31 Minnesota Attorney General s Office Charitable Organization Annual Report and registration renewal, due July 31 Wisconsin Department of Financial Institutions, Supplement to Financial Report, Form 1952, due September 30 The IRS forms are due May 15 (four and one-half months after year end). If the forms are not ready, an extension may be requested for an additional 3 months using form The Wisconsin form must have the completed 990 and 990A attached and is due September 30. No extensions are granted on this filing. If donations from the general public, including federated fundraising and foundation grants, exceed $100,000, the annual audit will need to be included with the Wisconsin form. The Form 990 and Form 1952 are completed by the external auditing firm that performs the annual audit. Data needed for these submittals are gathered at the time of the audit. The Bookkeeper and Accountant may be asked to provide information and analyses to complete these forms. The Accountant and Executive Director review the activity of the prior year to determine if there was any unrelated business income. Such income would include newsletter advertising, sales of the mailing list, sales of items not related to our exempt purposes and debt-financed rental income not received as part of performing the exempt purposes. The unrelated business income tax form is 990T for the IRS and 4T for Wisconsin. Gross unrelated business income in excess of $1,000 requires that a return be prepared, even if the activity is not profitable. Generally, the 990T and 4T will be prepared by the independent accountants. The due date for these returns is May 15, with an automatic extension of 6 months using form Page 15 of 36

16 9.00 ALLOCATIONS 9.10 Policies Central office will retain 70% of all chapter membership dues for general operations, and distribute 30% to the chapters quarterly. Workman s Compensation Insurance will be allocated to chapters based on exposure to risk. TPE may be required to follow various guidelines for allocating income and costs which benefit more than one program or grant. Grant proposals may include an administrative fee, unless otherwise directed by the grantor (e.g. Uniform Grants Guidance). Grants received without a specified administrative fee will be charged a 5% program administrative fee. Central office will retain 5% of all temporarily restricted donations to cover administrative cost of tracking the specific funds. This policy will be communicated to donors through language noted in the website and other communication tools. Program administrative fees will not apply to permanent endowments Procedure 9.21 Investment Income (Trust) Allocations of investment income and fees are calculated quarterly for comingled Trust funds which are held in a single portfolio, based on the average 4-point balance (capturing deposits and withdrawals) over the quarter. This is performed by the Accountant, and a report is produced for review by the Executive Director Membership Dues At the end of each quarter, the Bookkeeper calculates and initiates transfer of 30% of all dues received for each chapter to the chapter s bank account, and reclasses the income Grants Overhead Rates Please see the TPE Chapter and Central Treasurers Handbook Program Administrative Fee When a temporarily restricted donation is received, the Bookkeeper records the 5% allocation to Central office, unless otherwise directed by the Executive Director The Bookkeeper records admin fees on grants when earned Insurance Expense Page 16 of 36

17 Workers Compensation insurance is allocated to the Chapters based on risk exposure. This calculation is performed by the Bookkeeper at the time the bill is received, and allocated back to Chapters via release of the prepaid insurance accrual by the Accountant. Page 17 of 36

18 10.00 INCOMING GRANTS Please see the TPE Chapter and Central Treasurers Handbook. Page 18 of 36

19 11.00 INVESTMENTS Policies Gifts of stock or other equity or bond instruments will be liquidated on receipt, with the proceeds deposited in the appropriate checking or investment account to be invested according to TPE Investment Policy. All portfolios will be invested in accordance with TPE Investment Policy. These funds may be comingled in a single portfolio unless prohibited by the Agreement. The Finance Committee will appoint a Portfolio Manager to invest, monitor and rebalance the portfolio as needed. Also please see separate TPE Investment Policy Procedures TPE maintains money market accounts at the same bank where the checking account is maintained. Certificates of deposit may also be used to invest excess cash. The Bookkeeper requests the transfer of funds or setting up new certificates of deposit based on projected cash flow requirements. Endowment funds, and any other cash designated by the Board, is maintained in a money market account, certificate of deposit, or passive investment portfolios. The Accountant books investment activity for the designated and endowment funds quarterly, and maintains a model that tracks value by quarter and calculates allowed distributions. This model is reviewed by the Executive Director quarterly. Please see Section 13 below for more information. The Manager informs the financial institution as to how contributions and distributions are to be allocated within the portfolio. The Manager examines the status of the portfolio diversification quarterly, and informs the financial institution of changes needed to keep diversification within the ranges specified in the Investment Policy. The Manager prepares a quarterly report for the Finance Committee that includes diversification and portfolio performance compared to benchmarks. Page 19 of 36

20 12.00 DEBT Policies Board approval will be required before incurring any debt of TPE other than operating trade payables and budgeted payroll payables. The Executive Director will be authorized to negotiate such debt as needed by the Board of Directors. Any loan covenants and restrictions will be reported to the Board when the debt is authorized. The Accountant will periodically review these covenants and report to the Executive Director if there are any violations or potential violations of the covenants Procedures The Executive Director and Board President or Treasurer sign any debt agreements after receiving full Board approval. The Accountant reconciles the general ledger debt balances to statements or amortization schedules each month, and records accrued interest in the general ledger as needed. Page 20 of 36

21 13.00 DONOR RESTRICTED NET ASSETS SHORT TERM Policies TPE may receive restricted donations for a specific limited-term purpose as directed by the donor. These funds will be tracked by chapter and project and reconciled monthly. Donor restricted net assets will be reported as restricted in accordance with SFAS #117. At time of receipt, TPE Central Office may withdraw an administrative fee of 5% to cover the cost of tracking the funds. Executive Director has discretion to charge or waive this fee. (See Section 9.) Distributions from restricted donations will be subject to the TPE s approval requirements but do not require Board approval. Distributions from endowment accounts are subject to different requirements (see Section 14). TPE may solicit funds for restricted accounts at their sole discretion. TPE will accept restricted funds and gifts established by individual donors or other contributors for land conservation purposes within TPE s mission on the terms and conditions contained in this policy. Gifts accepted by the organization are subject to the Gift Acceptance Policies of the organization. Restricted funds with limited-term donor restriction may be comingled in bank accounts with unrestricted funds Procedures The Bookkeeper deposits donations as received, assigns a job code to the project, and adjusts the Restricted Net Assets account. The Bookkeeper confirms that funds are available before processing requests for distribution, and again adjusts the Restricted Net Assets account. The Bookkeeper reports project activity and balances to the Chapters monthly. The Accountant maintains records of contributions and disbursements by project, and reports a summary status of all projects in the monthly financial reports to the Finance Committee and Board of Directors. The Accountant also reconciles project balances to the Restricted Net Assets account monthly. In addition to direct contributions, TPE holds temporarily restricted assets resulting from growth of permanent endowments. See Section 14. Page 21 of 36

22 14.00 DONOR RESTRICTED NET ASSETS - ENDOWMENT Policies TPE may accept endowments established by individual donors or other contributors for risk management or land conservation purposes within TPE s mission on the terms and conditions contained in this policy. Gifts to be placed in endowments are subject to the Gift Acceptance Policies of the organization. TPE may solicit funds for restricted accounts. Donor-restricted endowment accounts must be established with a signed Endowment Gift Agreement. Contributions to permanent endowment funds will be held in perpetuity, and distributions may only be made from earnings and market gains ( growth"). Annual disbursements from permanent endowments are allowed, calculated as 4% of the twelve quarter average principal amount (13-point average) in the endowment, measured on December 31st of the preceding year. In no case shall a disbursement be made which would cause the principal balance to drop below the value of donated funds. The entire balance of a temporary endowment fund is available for distribution as needed, in accordance with the individual policy of the fund. TPE will charge a 0.5% administration fee annually to all donor-restricted endowment funds. The Finance Committee will make recommendations to the Board as to the disbursement of the funds from all endowment accounts. The Board has final discretion. Accounts will be established to maintain financial activity and reported as donorrestricted in accordance with SFAS #117. Financial reports will be maintained to track the components of value so that proper asset classification can be made, and to allow accurate calculation of distributions. No funds in this account shall be used as collateral to borrow money from any other source. The Board of Directors may amend and interpret this policy from time to time by majority vote of the Board Procedures Trust endowments that are comingled in the Trust portfolio receive allocated gains, losses and fees as detailed in Section 9. Non-Trust endowments are each maintained in separate investment accounts. The Bookkeeper deposits donations as received and adjusts the Restricted Net Assets account. The Accountant maintains detailed records of contributions and investment activity and reconciles the accounts. The Accountant calculates a 0.5% annual fee after year-end, arranges cash availability with the Financial Institution, and requests the transfer through the Bookkeeper, with ap- Page 22 of 36

23 proval from the Executive Director. These fees are unrestricted income to the Central Office. Distributions from permanent endowments are calculated by the Accountant in accordance with TPE policy. These calculations are reviewed by the Finance Committee and presented to the Board. Once approved, the distributions are offered to the receiving Chapter. A Chapter may decline a distribution, in which case the money is retained in the fund as accumulated growth and remains available for future distribution. Distributions received by the Chapter are tracked as restricted until spent. Proposals to distribute funds from temporary endowments are reviewed by the Finance Committee and presented to the Board for approval. Please see Appendix A for a list of active endowments, and individual policies. Page 23 of 36

24 15.00 BOARD-DESIGNATED ENDOWMENTS Policies With approval from the Board of Directors, TPE may establish endowments for future operating needs. These are unrestricted, quasi-endowment funds. TPE may add funds from existing unrestricted accounts (self-fund), or contributions may be solicited, but must be free from donor restriction. No administrative fee is charged. All self-funded additions, and all distributions, must be approved by the Board of Directors. The Board of Directors may amend and interpret this policy from time to time by majority vote of the Board Procedures Proposals to self-fund or distribute from board-designated endowments are reviewed by the Finance Committee and presented to the Board for approval. The Board has final discretion. Please see Appendix A for a list of active endowments, and individual policies. Page 24 of 36

25 16.00 LAND ACQUISITIONS & EASEMENTS Policies Land acquisitions will be capitalized. Easements will be expensed. New land acquisitions and easements will be approved by the board before initiation Procedures The Bookkeeper assigns a fund code to track each potential land acquisition. Expenses that will eventually be capitalized are collected on the balance sheet in Prepaid Expense until the acquisition is finalized. The Accountant tracks and reports acquisition activity and reports status to the Board each month. Acquisition costs not covered by donations at the time the acquisition is capitalized are removed from Prepaid Expense and charged to expense (taken from unrestricted net assets). Detailed policies and procedures for land acquisition and easements are contained in the TPE Policies and Procedures Handbook. Page 25 of 36

26 17.00 PROPERTY AND EQUIPMENT INVENTORY Policies An inventory of all property and equipment will be maintained by the Accountant. The inventory files & documentation will be maintained by the Bookkeeper and will contain sufficient information for insurance and grant requirements. The property and equipment database will be consulted prior to sale of any item to determine if there are restrictions. Grant purchased equipment may generally not be sold without the grantor s permission. Equipment will be included in the database using the definitions for capitalization in Section 3. An annual inventory will be taken to verify the existence of the property and equipment listed in the database Procedures The Accountant maintains a database of all capitalized property and equipment owned by TPE. The database includes description, acquisition date, cost, vendor, location and any grant or other restrictions. This database is used for depreciation calculations. A list of capital equipment inventory will be sent to the chapters in September, for return with updates by October 31. Page 26 of 36

27 18.00 INTERNAL CONTROLS AND FINANCIAL AUDIT Policies The review of internal controls and the annual audit are two of the most important procedures the Board has for fulfilling its fiduciary responsibilities to TPE. Internal controls pertaining to accounting records will be established by the Executive Director and Board Treasurer in consultation with the Accountant and Auditor. TPE will strive for separation of duties in the handling of checks, cash and bank accounts as feasible within the limited resources of a small organization. The Executive Director will review supporting documents before approving disbursements and cash transfers between accounts Procedures TPE maintains a Chapter and Central Treasurers Handbook which includes procedures to be followed and forms to be used to document disbursements and transfers of cash. These procedures and forms are designed to standardize the financial functions, ensure accuracy, and provide the means for the Executive Director to properly oversee and control the movement of cash. The Accountant reviews transactions and analyzes financial statements, and is responsible for noting any problems to the Executive Director or directly to the Board Treasurer or President. Whenever there is a change in administrative personnel or a change in the operating structure of the organization, the Treasurer and Executive Director meet to determine that the internal control system continues to meet the needs of TPE. If appropriate, the changes are reflected in this manual. Changes to improve internal control suggested by the audit firm are discussed with the Finance Committee and, if approved, implemented before the next audit. Please see Section 8 for more audit-specific information. Also please see the TPE Chapter and Central Treasurers Handbook. Page 27 of 36

28 19.00 BUDGETING Policies The Board of Directors will be responsible for guiding the budget process and for approval of the annual budget. The Executive Director, Bookkeeper and Chapter Treasurers will be responsible for preparing the proposed budget Procedures The budgeting process begins with worksheet formatting in September for the following fiscal year. This allows for nine months of results to be used in planning the budget. At the close of September, budget worksheets are populated and distributed to Chapters. All completed budget worksheets will be submitted to the Accountant by mid- November for consolidation into an overall budget. The Executive Director and Accountant then review the collated result to determine if there are any obvious areas which may need to be reworked. The budget is submitted to the Finance Committee by mid- December for review and feedback. Any further revisions are made and the budget is presented to the Board mid-december. The responsibility for each area of the budget is as follows: Executive Director -- Program revenues and expenses, fundraising revenues and expenses, donations revenue, operations expenses, and capital budget for the Central office. Chapters all income and expense not related to Central office. Accountant process improvement, modeling, analysis, and final reports After completion and approval of the budget by the Board of Directors, the budget may not be modified for subsequent activities. Plan revisions are accommodated by revisions to forecasts and noted in financial statements during the year. Page 28 of 36

29 20.00 COMPLIANCE Please see TPE Policies and Procedures Handbook, Part I, Standard 2, Section A. Page 29 of 36

30 21.00 ACCESS TO RECORDS, RECORD RETENTION, AND COMPUTER BACKUP See TPE Policies and Procedures Handbook, Part I, Standard 2, Section D. Page 30 of 36

31 22.00 MAINTENANCE OF ACCOUNTING POLICIES AND PROCEDURES MANUAL Policies The Accounting Policies and Procedures Manual is critical to the accounting function of TPE. This manual should not conflict with other manuals, handbooks, or guidelines. The Accountant will be responsible for maintaining the manual. All proposed changes must be approved by the Executive Director and Finance Committee. This manual will be dated with the date of each approved revision Procedures Each year the Accountant and Bookkeeper will review the manual and formulate proposed changes. This update will be completed no later than October of each year. If the Accountant has no proposed changes, a memo to that effect must be approved by the Executive Director. Whenever changes to the accounting procedures are made, a review of the Accounting Policies and Procedures Manual is done by the Accountant to determine if a revision is required. Any minor revisions to the manual which are not reflected in the manual immediately are kept on file to incorporate into the formal annual update. Simultaneously, the TPE Policies and Procedures Manual and the TPE Chapter and Central Treasurers Handbook are reviewed for consistency and comprehensiveness. The revised manual is distributed to the Bookkeeper, Accountant, Executive Director and Board Treasurer SUMMARY of ACTIVE ENDOWMENTS Page 31 of 36

32 Donor-Restricted and Permanent 1. Land Management Trust - a formal trust of which TPE is the sole beneficiary. Funds for each property are comingled in a single investment account, but are tracked and accessed individually. Earnings are to be used for land management activities such as ground restoration and management, for purchase and maintenance of equipment and land improvements, and for supplies. May distribute up to 4% annually (see Section 14). 2. Easement Monitoring a general fund established to cover the costs of monitoring easements granted to TPE. Annual monitoring ensures that the eased lands are in compliance with the provisions of their easements. May distribute up to 4% annually (see Section 14). 3. Thomson Internship on reaching its target goal of $100,000, earnings will be used to cover the costs of providing internships for students doing land management, inventory, and protection, or education outreach. May distribute up to 4% annually (see Section 14). Donor-Restricted and Temporary 4. Legal Defense a risk-management fund to be used to litigate or defend any TPE held easement. Distributes as needed; total balance is available for use. Board-Designated 5. Operations an unrestricted quasi-endowment fund set aside with the intention of providing annual support of administrative staff and overhead at TPE. Will commence annual distributions after target balance of $1,000,000 is met. Exempt from administrative fee. Page 32 of 36

33 APPENDIX A ENDOWNMENT FUND POLICIES Easement Monitoring Endowment A. Purpose & Objectives The purpose of the Easement Monitoring Fund is to fund TPE s stewardship obligations which may include but are not limited to annual visits to each protected property, documenting compliance with easements and conservation practices, responding to landowner inquiries, orienting new landowners to their responsibilities, responding to requests for approval of permitted activities, responding to requests to amend an easement document, and responding to any potential easement violations. The investment objectives of the Fund align with TPE s Investment Policy and include maintenance of principal, timely liquidity, and preservation of purchasing power over time. The fund will be invested in an individual account and managed according to the TPE s Investment Policy. No funds in this account shall be used as collateral to borrow money from any other source. B. Funding: TPE has an easement monitoring & defense fund calculator that is used to determine the costs for monitoring its conservation easements. This formula is used to determine the easement monitoring costs for each project that TPE completes. This figure is used as the basis to discuss with each landowner on how to address the costs, which can be split between the upfront costs to complete the project and monitoring and legal defense costs. Typically a contribution is made by the landowner at the time of the closing. The landowner and TPE can agree about how to address the funding needed, which can result in a payment(s) over a series of years, and/or a transfer fee written into the easement document to fund the cost when the property changes hands in the future. It is TPE s policy to have the funding need addressed when a project is presented to the Board for final approval. C. Income Distributions: Purpose: All disbursements must be used for the purpose stated above. Process: All requests for disbursements will be reviewed by the Finance Committee which will then make a recommendation to the Board. All disbursements must be approved by the Board. Amount: Annual disbursements may be made up to 4% of the twelve quarter (13-point) average principal amount in the endowment measured on December 31st of the preceding year. In no case can a disbursement be made which would cause the principal balance to drop below the value of donated funds. Admin Fee: In accordance to TPE s Accountant s Manual, a 0.5% administrative fee can be drawn down annually to cover TPE s costs to manage the fund. D. Amending Process Changes to these policies require approval by a majority of the Board. Legal Defense Fund Page 33 of 36

34 A. Purpose & Objectives The purpose of the TPE Legal Defense Fund is to provide resources to enforce conservation easements owned by TPE and to enforce conservation policies of TPE on real estate owned by TPE. Such activities include but are not limited to staff, legal counsel or other professional contractual work needed in determining any potential violation of a conservation easement. It can also be any act of vandalism, trespassing, or activity that degrades or harms the ecological integrity of a property owned by TPE. It could also include litigation, mediation, or mitigation costs to address any violation as determined by the Board or activity that occurs on owned property as stated above. The investment objectives of the Fund align with TPE s Investment Policy and include maintenance of principal, timely liquidity, and preservation of purchasing power over time. The fund will be invested in an individual account and managed according to the TPE s Investment Policy. No funds in this account shall be used as collateral to borrow money from any other source. B. Funding: Conservation easements: TPE has an easement monitoring & defense fund calculator that is used to determine the costs for legal defense its conservation easements. This formula is used to determine the legal defense costs for each project that TPE completes. This figure is used as the basis to discuss with each landowner on how to address the costs, which can be split between the upfront costs to complete the project and monitoring and legal defense costs. Typically a contribution is made by the landowner at the time of the closing. The landowner and TPE can agree about how to address the funding needed, which can result in a payment(s) over a series of years, and/or a transfer fee written into the easement document to fund the cost when the property changes hands in the future. It is TPE s policy to have the funding need addressed when a project is presented to the Board for final approval. Fee owned properties: The costs for legal defense of a TPE s owned properties are currently determined by national standards of a flat rate of $1,500 per project. It is up to the chapter that is sponsoring the project to determine how to address this cost. C. Distributions: Purpose: All disbursements must be used for the purpose stated above. Process: All requests for disbursements will be reviewed by the Land Protection Committee which will then make a recommendation to the Board. All disbursements must be approved by the Board. Principal: The entire balance in this fund is available for the use stated above. Admin Fee: In accordance to TPE s Accountant s Manual, a 0.5% administrative fee can be drawn down annually to cover TPE s costs to manage the fund. D. Amending Process Changes to these policies require approval by a majority of the Board. Page 34 of 36

35 Olive and John Thomson Internship Fund (Thomson Fund) A. Purpose & Objectives The purpose of the Thomson Fund is to ensure that financial resources are available to provide student interns to work on TPE sites, and to provide educational opportunities for college age students while providing productive service to TPE projects. The emphasis of the student intern work shall be on land management, biological and environmental monitoring or surveying and public environmental education and outreach focusing on TPE s mission and its preserves. The investment objectives of the Fund align with TPE s Investment Policy and include maintenance of principal, timely liquidity, and preservation of purchasing power over time. The fund will be invested in an individual account and managed according to the TPE s Investment Policy. No funds in this account shall be used as collateral to borrow money from any other source. B. Funding: Endowment growth will be funded by contributions from the Olive and John Thomson family, and by investment earnings. C. Income Distributions: Purpose: All disbursements must be used for the purpose stated above. Process: All requests for disbursements will be reviewed by the Finance Committee which will then make a recommendation to the Board. All disbursements must be approved by the Board. Amount: Annual disbursements may be made up to 4% of the twelve quarter (13-point) average principal amount in the endowment measured on December 31st of the preceding year. In no case can a disbursement be made which would cause the principal balance to drop below the value of donated funds. Admin Fee: In accordance to TPE s Accountant s Manual, a 0.5% administrative fee can be drawn down annually to cover TPE s costs to manage the fund. D. Reporting Annual reports, in a manner satisfactory to the Thomsons, shall be provided to them not less than annually. When none are living, then the annual report shall be provided to Erik S. Thomson and Heather S. Rinke, or to the survivor. E. Amending Process This policy may only be amended by written document executed by TPE, The Trust, and Dennis W. Thomson, Joan S. Thomson, and Olive Thomson ( the Thomsons ), or if the Thomsons are not all living, by the survivors or survivor. In the event none are living, then amendment will require the written consent of Erik S. Thomson and Heather S. Rinke, or if only one is living, by the survivor. If none are living, amendment may be executed by a written document created by TPE. Operations Endowment Page 35 of 36

36 A. Purpose & Objectives This fund is an unrestricted quasi-endowment fund set aside with the intention of providing annual support of administrative staff and overhead at TPE. The organization reserves the right to use these funds for alternative needs at any time. The investment objectives of the Fund align with TPE s Investment Policy and include maintenance of principal, timely liquidity, and preservation of purchasing power over time. The fund will be invested in an individual account and managed according to the TPE s Investment Policy. No funds in this account shall be used as collateral to borrow money from any other source. B. Funding: TPE may add funds from existing unrestricted accounts (self-fund), or contributions may be solicited, but must be free from donor restriction. All self-funded additions must be approved by the Board of Directors. C. Distributions: Purpose: To provide annual support of administrative staff and overhead. Process: Distributions will commence after the target balance of $1,000,000 is met. All requests for disbursements will be reviewed by the Finance Committee which will then make a recommendation to the Board. All disbursements must be approved by the Board. Amount: Annual disbursements may be made up to 4% of the twelve quarter (13-point) average principal amount in the endowment measured on December 31st of the preceding year. In no case can a disbursement be made which would cause the principal balance to drop below the value of donated funds. D. Amending Process Changes to these policies require approval by a majority of the Board. Page 36 of 36